To use an anology, when you eliminate any group of customers, some specific numbers go up and others go down. Let’s say grocery stores tracked the average grocery bill and it was $50.00 and then they posted a sign that only people with more than three children at home can shop at that store. Then the average grocery bill goes to $100 but total sales drop. Why? Because single people buy less groceries. The store has lower overall sales and less profit but the averge amount per customer went up.
Eliminate or reduce people with bad credit, no down payment or first time buyers from the game and median price goes up because those people would have bought cheaper houses, bringing down the median.
Look at the reports on any financial website from yesterday and you will see total sales hit a 20 year low, down 9% in the west where the weather was fine. This is a temporary situation with the median because, unlike groceries, expensive homes are purchased by people who generally sell medium priced homes and the medium come from the cheap. The cheap will be hit now, the medium are in the “on deck circle” and the expensive is still sitting in the dugout, but they will get their turn at bat. But since I delved into another analogy, the pitcher loses a little strength with each batter so the expensive homes get to face him when he’s a little more tired and they are the better of the three at bat so it’s not entirely one sided.
The trouble is, this pitcher is 9 feet tall, 300 lbs and is on a steroid nobody has ever heard of. The strength and size of this pitcher (bubble) isn’t just 5% or 10% better than the last guy, it’s double, 180 mph fastball has a lot of us scared. Batter number one (sub prime) snapped his leg in half just walking to the plate. What’s next?
